The Turkish lira weakened to a new record low of 44.5 per USD in April, extending its steady depreciation despite ongoing central bank interventions in the foreign exchange market. The bank’s disinflation strategy has hinged on achieving a real appreciation of the lira, aiming to ensure that the currency does not lose value faster than the pace of monthly inflation. Consumer prices rose 1.94% month-on-month in March, the slowest increase in three months.
In response to the Middle East crisis, Turkish policymakers have tightened liquidity conditions, increased the cost of lira funding, and instructed state-owned banks to support the currency in FX markets. The government has also activated a special “sliding scale” mechanism that adjusts fuel taxes in line with oil price movements to limit their pass-through to domestic prices. While the central bank kept policy rates unchanged in March, money markets are increasingly pricing in a rate hike later this month.
